Fast-food giant McDonald's will open its first restaurant in the oil-rich Central Asian state of Kazakhstan next year, in partnership with an energy tycoon related by marriage to President Nursultan Nazarbayev.
The company will open its first burger bar at an unspecified location in Kazakhstan in the second half of 2015, with more to follow, it announced on November 12.
McDonald’s is heading into Kazakhstan with good connections guaranteed: It will be partnering with prominent gas tycoon Kairat Boranbayev, whose daughter Alima is married to Nazarbayev’s grandson, Aysultan Nazarbayev.
“Our agreement with Kairat will enable us to continue to build our brand,” Doug Goare, president of McDonald’s Europe, said of the foray into Kazakhstan, where insiders say that the key to business success is often not what you know but who you know.
The Kazakhstan launch comes as McDonald’s comes under massive pressure in neighboring Russia, where more than half of its 440 locations are under investigation over alleged health and safety violations (which the company denies) and nine outlets have been temporarily closed.
Kazakhstan is a close economic partner of Russia’s, but has been keen to distance itself from Moscow as Western sanctions bite, making it abundantly clear that its doors are always open to foreign investors.
Astana has promised to save Kyrgyzstan from near-certain energy crisis this winter, committing to supply over a billion kilowatt-hours of electricity and releasing several Kyrgyzstan-bound oil tankers stuck on the border between the two countries since April. But questions remain about the terms of the deal signed by Kazakhstan’s Nursultan Nazarbayev and Kyrgyzstan’s Almazbek Atambayev on November 7.
Chiefly, how will Kyrgyzstan finance the difference between the cost of the electricity it is buying from Kazakhstan and the low rates its own citizens expect to pay—lower, according to energy officials, than the cost of production?
In other words, Kyrgyzstan has agreed to pay Kazakhstan far more than it charges its citizens per kilowatt-hour. Most of the energy will be subsidized by the impoverished government, Nurbek Elebaev, director of Kyrgyzstan’s State Department for the Regulation of the Fuel and Energy Complex, told Vechernii Bishkek on October 31. (Note: $1 is about 58 soms at current rates.) He said:
It is worth noting that the cost of the imported energy is 5.13 soms for a kilowatt-hour. Accordingly, every kilowatt-hour will be subsidized [by Kyrgyzstan] by around 3 soms. Moreover, 5.13 soms is the cost of electricity up to the Kazakh border. The cost of transit from the border to the consumer will be borne by [Kyrgyzstan’s] energy company. How the company will cover the financial deficit will be decided by the government. The cabinet will need to borrow money. This tariff will apply to 1 billion kilowatt-hours of electricity. A further 400 million kilowatt-hours will be determined by an exchange in kind.
The man convicted of ordering the murder of an opposition leader eight years ago is to be released on parole, a court in Astana has ruled. The decision raises, yet again, questions about the judiciary’s independence.
Yerzhan Utembayev will be released after serving eight years of his sentence over the brutal killing of Altynbek Sarsenbayev, an opposition leader and former government minister, in 2006, Tengri News reports.
Sarsenbayev’s brother, Rysbek Sarsenbay, had asked the court not to release Utembayev, claiming that he is concealing the names of those really responsible for the murder. “We want those who are really guilty to be exposed and convicted,” Sarsenbay said. But his arguments fell on deaf ears.
At his trial in 2006, Utembayev – who originally confessed to contracting the murder, but later recanted – was jailed for 20 years after being found guilty of hiring a hitman to kill Sarsenbayev for $60,000 in revenge for a newspaper article making unflattering revelations about him.
The trial found that Utembayev (who was at the time was head of the Senate secretariat) contracted Rustam Ibragimov, a former Interior Ministry officer, who set up a death squad comprising rogue members of elite Kazakhstani anti-terrorism units, which kidnapped Sarsenbayev and two aides and delivered them to Ibragimov, who killed the three men.
The 19th-century Kazakh and Russian cultural icons depicted enjoying a kiss on a poster may be long dead. But that has not stopped a court in Kazakhstan awarding massive damages to a group of living people who claim the image of two men kissing has hurt their feelings.
On October 28, a court in Almaty ordered the advertising agency that designed the poster – which shows Kazakh composer Kurmangazy Sagyrbayuly and Russian poet Alexander Pushkin kissing – to pay 34 million tenge ($188,000) to a group of 34 music students and teachers whose only tenuous connection to the image is that they study and work at the Kurmangazy Kazakh National Conservatory, Tengri News reports.
The ruling awarding each plantiff a million tenge is “unfair,” said Dariya Khamitzhanova, director of the Havas Worldwide Kazakhstan agency, which designed the poster. “This 34 million will ruin our company.” She pledged to appeal, but meanwhile the court has frozen the agency’s assets.
The controversial poster – advertising an Almaty gay club at the intersection of Kurmangazy and Pushkin streets and inspired by a famous image of the leaders of East Germany and the Soviet Union kissing in 1979 – was designed for an advertising competition in August and was never intended for showing in the public domain.
However, after the picture started doing the rounds on social media a public outcry ensued and three separate lawsuits were launched against the agency, which has repeatedly apologized for any offense caused.
Newly appointed defense minister Imangali Tasmagambetov. (photo: MoD of Kazakhstan)
Kazakhstan President Nursultan Nazarbayev has removed the country's defense minister Serik Akhmetov after only six months in service, replacing him with the current mayor of Astana, Imangali Tasmagambetov. Nazarbayev gave no explanation for the move, but analysts and inside sources seem to suggest two explanations for the reshuffle: Akhmetov's connection to a corruption scandal and Tasmagambetov's ability to steer the military in what is becoming a difficult time.
An analysis on the Kazakhstan news site TengriNews noted that "The fighting in Ukraine has demonstrated the inadequacy of the Ukrainian army, which led the Kazakh leaders to seriously examine the state of its own army.... Being an apt economic manager, Tasmagambetov was chosen to solve the problems in the Ministry [of Defense]." It quotes political analyst Aidos Sarym: “Apparently, there is a need for a person with strong charisma and good organisational abilities to manage the army. Now the army is experiencing very unpleasant processes that suggest that our defenses are very low. It is clear that this very large corporation needs efficient people to deal with it.” Similar theories were promulgated by a number of other experts.
What to get the oligarch who has everything? How about a caviar spa experience on the shores of the Caspian Sea?
Billed as a “black caviar spa for real gourmands,” this is one of the leisure experiences that will be available at the upmarket Kenderli resort in Kazakhstan when it opens its doors in a few years. If immersing your body in a bath of fish eggs is not to your taste, how about “dances with seals?”
These and other once-in-a-lifetime experiences are being touted to lure tourists to a part of Kazakhstan not known for bringing in the holiday hordes: the eastern shores of the Caspian Sea, where, if developers get their way, a high-class resort will soon spring up out of the desert, reports Tengri News.
The development blueprint expects that by 2020 over half a million tourists will be flocking to Kenderli every year, with foreigners making up over half of the projected 642,000 visitors. Russia is considered the most promising market, but the resort will also target holidaymakers from other parts of Central Asia and the former Soviet Union, and visitors from Turkey and the Middle East.
Developers have an ambitious vision for Kenderli as “a superb 21st century tourist coastal resort” that will become the “best” on the Caspian, “the perfect destination for domestic and international tourists, generating wealth for the region and wellbeing for our people.”
With a cold, dark winter inching closer each day in Kyrgyzstan, the government is desperately trying to strike bilateral energy-import agreements with anyone and everyone. But as policymakers go hunting around Central Asia to plug an estimated deficit of over 2 billion kilowatt-hours, prices and political differences are potent sticking points.
Any bilateral deal would require the differential in electricity costs be borne either by the insolvent government, or by ordinary Kyrgyzstanis, who are accustomed to paying $0.015 per kilowatt-hour. That’s far below the cost of production and substantially less than citizens pay in any other Central Asian country.
So Kazakh electricity, which costs around four times as much for Kazakhs, is expensive to most Kyrgyz, although that didn’t stop Astana and Bishkek agreeing to an import deal in principle last week. Tajik electricity is over one-and-a-half times as expensive as the Kyrgyz version and it is doubtful whether a country whose own rural residents spend a lot of time in the dark has any power to spare.
The perfect cure to a Kyrgyz winter of misery, then, could come from gas-rich Turkmenistan.
A BMW 7 Series sedan. Will Kazakhstan's Olympic officials be using official money to buy themselves any of these? It's happened before. (BMW.ru)
The question on some minds in Almaty is not if Kazakhstan’s financial hub will win the right to host the 2022 Winter Olympics, but rather, if Almaty does, who will steal the public funds designated for the Games. After all, few in Almaty were shocked to learn this week that the last time they hosted a big sporting bash, millions of dollars disappeared.
A judge in Almaty has sentenced Aidar Musin, a member of the 2011 Asian Winter Games organizing committee, to over five years in jail for embezzling more than $3 million from the state’s budget for those games, reports TengriNews.
Kazakhstan's financial police had alleged that a company with connections to Musin won a 1.4 billion tenge ($7.3 million) contract to provide a telecommunications system and equipment for a ski-jumping complex in Almaty. More than 600 million tenge ($3.3 million) from that contract disappeared, with Musin using some of this money to buy himself a 2009 model BMW 750 sedan and a 2011 model Mercedes Benz E-250 sedan, the Almaty City Court ruled.
Almaty is one of two finalists in the competition to host the 2022 Winter Olympics. Only Beijing is also still in the running after a gaggle of European cities pulled out, citing low public support for the billions necessary to host the spectacle.
Kazakh officials say they are keen to keep costs for the 2022 Winter Olympics under control by attracting sponsors and advertisers to cover most expenses. The budget is currently around $3.7 billion. But as with any major project in Kazakhstan, it is hard to avoid questions about corruption.
The ruble vs the tenge over the last 12 months. The sharp change in February indicates the first tenge devaluation. Since then, the ruble has continued to slide, again putting pressure on the tenge. xe.com.
As the price of oil falls, and as Russia’s Central Bank struggles to keep the ruble from hitting a new record low each day, Kazakhstan’s currency is facing pressure on two fronts. The major oil producer, whose economy is tightly linked to Russia’s, already sharply devalued the tenge once this year. But facing these new challenges, can the Kazakh National Bank hold its currency stable? And can Kazakhstan keep its books balanced?
Higher output and weaker global demand have pushed the price for benchmark Brent crude to $83 per barrel, its lowest in four years, down 27 percent since June. Oil, Kazakhstan’s chief export, is still above the government’s fiscal breakeven point of $65.5 per barrel, as calculated by the IMF. But it is below $90.6, where Kazakhstan faces a balance of payments deficit that puts further downward pressure on the currency. Moreover, trade with Russia is down 22 percent this year.
Kazakhstan’s “tenge weakened in forward markets last week, responding to a drop in the price of oil and sliding ruble,” Halyk Finance, an Almaty-based investment bank, said in an October 13 note. “The weakening of the Russian ruble and falling oil prices are the main fundamental reasons of the tenge weakening in forward markets.”
Russia is Kazakhstan’s main trading partner. And because of the falling price of oil, and the effect of sanctions the West has imposed on Moscow for meddling in Ukraine, the Russian currency has fallen nearly 20 percent this year. That has put the ruble-tenge exchange rate back where it was just before the tenge devaluation (see chart).
President Nursultan Nazarbayev is in Brussels putting the finishing touches to a landmark agreement with the European Union, cementing ties with Europe even as Astana pushes ahead to join the Russian-led Eurasian Economic Union.
Nazarbayev met Jose Manuel Barroso, president of the European Commission, on October 9, to “confirm the conclusion of negotiations” on the Enhanced Partnership and Cooperation Agreement, the EU said.
The agreement – three years in the making – aims to boost cooperation in around 30 policy areas including trade and foreign and security policy, it said, and will “significantly deepen political and economic ties” between Kazakhstan and the EU (Astana’s largest trade partner and a major consumer of its energy exports).
The agreement is a far weaker deal than the Association Agreement signed by Ukraine this year, but is still the most ambitious deal to be concluded between the EU and any Central Asian state.
It “puts a strong emphasis on democracy and the rule of law, human rights and fundamental freedoms,” the EU stated, although it failed to specify how.
The visit was marred by news that France is investigating possible kickbacks involving a helicopter deal with Kazakhstan, and probing allegations that Nazarbayev put indirect pressure on Brussels to close a bribery case against Kazakhstani oligarchs.
There was also controversy over Kazakhstan’s human rights record.